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Beef Roundup: 2010 cattle industry outlook

Agriculture.com Staff 01/18/2010 @ 9:31am

If you have been involved in any aspect of the cattle industry over the last couple of years, you know it has been a trying time. A time that has brought with it herd liquidations that have decreased cattle numbers to record lows.

"Last year (2008) was not a good year for U.S. cattle feeders, and 2009 continued that trend," says Erica Rosa, agricultural economist for the Livestock Marketing Information Center (LMIC). "Cattle feeders posted notable losses this past year, as lower fed cattle prices have not been able to cover the costs of production."

As we enter a new year, what does 2010 hold for the cattle industry? Rosa takes a look back at where the industry has been and forecasts what's on the horizon.

In the first three quarters of last year, feeders lost an average $94 per steer vs. a loss of $102 per steer for the respective period in 2008.

"Estimated losses for average-performing cattle in feedlots were forecast to continue for the balance of 2009," says Rosa.

LMIC estimates for average feedlot returns are based on feeding out a 750-pound steer placed in a Southern Plains commercial feedlot, including all production costs incurred by the feeding operation.

"In November 2009, estimated breakevens for a 750-pound steer placed into a Southern Plains feedlot to be marketed were about $92 per cwt," she says. "Looking ahead, breakevens will remain in the $91- to $92-per-cwt range through January 2010."

Feedlots weren't the only sector recording losses. U.S. cow-calf operations also saw their profitability decline in recent years, with negative returns posted in 2008 due to higher costs of production and lower calf prices.

For 2009, as calculated by the LMIC, many cow-calf operations will not cover their cash production costs, and returns will likely be similar to 2008.

Net returns were pressured again in 2009, as input costs remained high compared to historical norms while calf prices struggled.

The LMIC estimates returns for 2009 were around a negative $20 per beef cow. If realized, Rosa says it will be the second consecutive negative year for the industry.

"Looking ahead, estimated cow-calf returns should be back in the black in 2010, as calf and cull cow prices rebound, with profitability forecast to return in 2010 and 2011," says Rosa.

While profitability may be on the horizon for the cow-calf sector, Rosa notes that herd growth is expected to be delayed.

"The U.S. beef cow herd is expected to be below a year ago on January 1, 2010, with herd stabilization likely in 2011. Any noticeable growth in beef cattle numbers is not expected until 2012," she adds.

Rosa cautions that while 2010 may prove to be a better year, beef producers aren't out of the woods just yet and must stay vigilant. A few things to keep in mind given the uncertainty and volatility of the markets over the last two years:

  • Volatility will continue to have an impact on profitability.
  • Events like September 11, 2001, BSE in late 2003, and the credit crisis in October 2008 will occur and affect markets.
  • Grain (corn) will still be a concern and/or factor. "Manage for three- to four-month periods (not cattle cycles) and know your cattle," says Rosa.
  • Near term, calf and yearling cattle prices will follow fed cattle prices. "Manage and market cull cows and begin planning for higher prices in 2010 and 2011," she says.

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